Monday 3 August 2009 15.00 EDT
First published on Monday 3 August 2009 15.00 EDT

Departing from the normal practice of Federal Reserve board chairmen, Ben Bernanke has taken to barnstorming the country in recent months, giving public talks and recently appearing in a lengthy interview on the NewsHour with Jim Lehrer. The reason for seeking a higher profile is simple: Bernanke wants to keep his job.

Bernanke's term ends in January. He was appointed by President George Bush. It would be understandable if President Barack Obama wanted to get his own person into this vital position. On the other hand, Bernanke has never been a rightwing ideologue, and he is one of the country's top monetary economists. In addition, Obama may be reluctant to change the Fed's leadership at a time when the financial system and economy are still fragile, so Bernanke may have a decent shot.

Of course if we were to grade his performance at the Fed, it would be hard to give Bernanke anything other than hugely failing marks. After all, it was the Fed's policy to allow the housing bubble to grow unchecked, with the idea that it could just pick up the pieces after it burst. This has led to the worst downturn since the Great Depression, likely costing the United States more than $6tn ($50,000 per family) in lost output.

While Alan Greenspan, Bernanke's predecessor, may deserve more of the blame, Bernanke is a close rival. He was one of the Fed's governors from 2002 to 2005, and then did a brief stint as head of the Council of Economic Advisers before taking over as Fed chair in early 2006. There were few people who were better situated to try to burst the bubble than Bernanke.

Bernanke would ask the public to ignore this monumental mistake and just consider the job he has done trying to rescue the economy following the collapse. This is like the captain of the Titanic asking for another command based on how quickly he got people into lifeboats after hitting the iceberg. Asking us to ignore the housing crash recession is a bit of a stretch, but in fairness to Bernanke, none of his likely competitors for the chairmanship warned of the bubble either, so maybe we should agree to grade him on a curve.

Even by this standard, it's hard to give Bernanke a passing grade. He did have the Fed move quickly and in unprecedented ways to flood the system with liquidity. Its balance sheet expanded from $600bn before the crisis to more than $2tn. Given the strains on the financial system, there can be little doubt that this expansion of liquidity was the right policy.

However, expanding liquidity is only half of the story. The other part is expanding liquidity in a way that is both fair and responsible. After all, in the current slump, just throwing $2tn from trucks would have also helped the economy.

By this measure, Bernanke's performance is very poor. He has refused to provide the public, or even the relevant congressional committees, with information on the trillions of dollars in loans that were made through the Fed's special lending facilities. While anyone can go to the Treasury's website and see how much each bank received through Tarp and under what terms, Bernanke refuses to share any information on the loans that banks and other institutions received from the Fed.

Where we do have information, it is not encouraging. At the peak of the financial crisis in October, Goldman Sachs converted itself from an investment bank into a bank holding company, in part so that it could tap an FDIC loan guarantee programme. Remarkably, Bernanke allowed Goldman to continue to act as an investment bank, taking highly speculative positions even after it had borrowed $28bn with the FDIC's guarantee.

This totally obliterated the separation between commercial banking and investment banking. Even supporters of the repeal of the Glass-Steagall Act claimed to recognise the need for such a separation. The lack of concern for such issues raises more concerns about the secret $2tn that the Fed has lent out.

Finally, we have to ask about Bernanke's conduct during the debate over Tarp. Bernanke played a central role in supporting the Bush administration's request, insisting that the financial system would collapse if Congress did not act immediately. In fact, he contributed one of the central story lines in their scenario, that the commercial paper market was shutting down. This was key, because if businesses could not issue commercial paper, then they would soon be unable to pay suppliers and meet their payroll, and the economy would shut down.

The important fact that Bernanke did not share with the members of Congress debating Tarp was that the Fed had the authority to directly buy commercial paper from businesses. In fact, he announced the Fed's plans to start doing this the weekend after Congress approved Tarp. In other words, the Fed could by itself have prevented the shutdown of the commercial paper market. If Congress had known this before it approved Tarp, it may have taken more time to debate the package and insisted on more serious conditions on items like executive compensation.

Just to be clear, if Bernanke were in any other line of work, it would be absurd to imagine him being re-appointed. He is the cook who burnt down the restaurant by leaving the stove on overnight, the doctor who amputated the wrong leg, the school bus driver who drunkenly drove into oncoming traffic. But even by the low standards of economic policymakers, Bernanke does not deserve another four years.